Alberta to partially reinstate provincial fuel tax, finance minister says

Albertans' provincial tax holiday at the gas pumps is fading with the summer weather.

The provincial government eliminated the provincial 13 cent-per-litre tax on April 1 after oil prices began to balloon and consumers grappled with inflation. Now relaxed oil prices have prompted Alberta to partly reinstate the provincial fuel tax starting Oct. 1, Finance Minister Jason Nixon told CBC News on Thursday. 

For the next three months, the provincial government will collect a tax of 4.5 cents per litre on gas and diesel.

"It will result in 8.5 cents being saved on every litre of gas and diesel for Albertans going forward, and we'll continue to build on the fuel tax program," Nixon said.

The program should have saved consumers around $650 million in its first six months, he said.

The government said it would review the policy quarterly and look at the price of oil when deciding whether to continue the relief program.

The 4.5-cent tax will funnel about $30 million per month to provincial coffers, Nixon said.

He says the finance department is drafting legislation to make the provincial gas tax relief program permanent. However, whether such a bill ever hits the legislative chamber depends on the next premier, he said.

Nixon said the government looked at the closing price of benchmark oil West Texas Intermediate each day between Aug. 15 and Sept. 15 to decide how much relief would come to the pumps this quarter.

Gas tax and inflation

The temporary program works by adjusting the gas tax depending on the price per barrel.

The province eliminates the gas tax if the average oil price is higher than $90 US per barrel. A price between $85 and $89.99 US per barrel would lead to a fuel tax of 4.5 cents per litre. If the price is between $80 and $84 US per barrel, the fuel tax will rise to 9 cents per litre. If the price falls below $80 US, the government will fully reinstate the provincial 13-cent tax.

Nixon said Statistics Canada has pointed to the tax relief program as a significant factor in controlling inflation in Alberta.

"That really confirmed for us the need to continue forward," he said.

People buying marked fuels will continue to enjoy a provincial tax holiday for now, Nixon said.

In a fact sheet published in July, the government said the policy has helped control costs for Albertans, and has kept prices at the pumps lower than the average price in the three other western Canadian provinces.

After prices surged to about $1.80 per litre in the summer months, pump prices have been dropping in Alberta. A central Edmonton station was selling regular fuel for about $1.39 per litre on Thursday.

NDP energy critic Kathleen Ganley said now is the worst time to reintroduce the provincial gas tax, even incrementally.

Although gas prices may be falling, she says high inflation rates are leaving people paying more for food, shelter and utilities.

"At every turn, this government makes decisions without families in mind, including today as we move to increase prices at the pump," Ganley said Thursday.

She pointed to an Ipsos survey of 2,000 people conducted for insolvency firm MNP, which found a third of Albertans were cutting spending on essentials due to rising costs.

Alberta's annual inflation rate as of August was six per cent.

Even with its reintroduction, the province will still have the lowest provincial fuel tax in the country.

Yukoners pay 6.2 cent-per-litre provincial tax on gasoline and people in Nunavut pay 6.4 cents per litre. The highest provincial tax in the country is in Vancouver at 27 cents per litre.

The price of fuel in Alberta also includes an 11 cent-per-litre carbon tax and a 10 cent-per-litre federal tax.

Nixon said the government is also preparing for a consumer natural gas rebate to begin in October. The rebate is supposed to kick in if the price of gas exceeds $6.50 per gigajoule and will cover the cost above that threshold.